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Author Topic: Crypto Exchange QuadrigaCX Missing $145 Mln After Death of Founder  (Read 306 times)
Baofeng
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February 02, 2019, 02:44:49 PM
 #1

Worst possible scenario for traders who have funds in QuadrigaCX as the founder is dead:

Quote
The exchange kept most its assets in offline storage systems called cold wallets, which are secured by digital security keys in order to protect them from hacking and theft. Cotten was solely responsible for the wallets and corresponding keys, which the company has been trying to find after his passing.

https://cointelegraph.com/news/crypto-exchange-quadrigacx-missing-145-mln-after-death-of-founder

Its seems that the owner has access to funds alone. And with his death, there's no one besides him that can unlock it. I guess this is another lessons learn for crypto owners to implement multi-signature (correct me I'm if wrong), and for traders to just keep small amounts in a exchange for trading purposes only so that in a event of a hack and this time a death of the crypto exchange founder itself would not put your funds at risk.

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February 02, 2019, 03:25:46 PM
 #2

Another reason why people should always control their private keys and why decentralization is the way to go.

I doubt these funds are lost forever, to be honest. He must've given access to someone or a group of people. If he was suffering from a disease, that would've been the logical thing to do.

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February 02, 2019, 03:40:38 PM
 #3

i think that is what we can call a good example of "centralized point of failure" .

I guess this is another lessons learn for crypto owners to implement multi-signature (correct me I'm if wrong),

there is no perfect solution. even using multi signature has flaws. for example who are you going to trust with the keys? what will you do if they try to work together and scam you. or what if enough number of them passed away that you could not again have access to the funds like a 4 of 5 key and 2 of them die!

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February 02, 2019, 04:03:58 PM
Merited by squatter (1)
 #4


Hmmmm.....

Quote
Mr. Cotten was diligent in other areas of his life. He signed a will on Nov. 27, less than two weeks before he died. 

sauce:
https://www.reddit.com/r/QuadrigaCX/comments/amaqyo/we_need_to_sue_geralds_estate_directly/


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February 02, 2019, 04:14:36 PM
 #5

Its seems that the owner has access to funds alone. And with his death, there's no one besides him that can unlock it. I guess this is another lessons learn for crypto owners to implement multi-signature (correct me I'm if wrong), and for traders to just keep small amounts in a exchange for trading purposes only so that in a event of a hack and this time a death of the crypto exchange founder itself would not put your funds at risk.
It is really a weired situation as only a single person has the access to the entire cold wallet funds, this is the problem with small exchanges and i am not sure how they will be compensating the clients, this is the risk involved when you are not having access to private keys, there must be something that has to be done to over come these situations, there must a regulation on how the funds are stored in exchanges and who have access to these funds to overcome these situations.

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February 02, 2019, 04:15:47 PM
 #6

This is kind of obvious though. If you have coins in an account make sure someone you really really trust could find the key/seed/password in case something unexpected and really bad happens.

This doesn't mean give it to them right away but if when you die they can find it easily, it goes a long way. Another thing is being sure that another person won't find it by accident because you would see as ghost as much that sucks.

Interesting lesson to be learned, luckily for me - Never heard of that exchange.

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February 02, 2019, 04:21:09 PM
 #7

*snip*

Yeap. Shady as hell. Also, if I remember what I've read a few days ago, the reason why the funds are inaccessible is because only Mr Cotten has access to the private keys? Not even multisig? That's the icing on the cake right there. I'm very convinced there's something else going on here and not just them being very unprofessional with their security.

If they were planning to pull something off like this they should've at least tried to be less conspicuous.

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February 02, 2019, 04:49:18 PM
 #8

Worst possible scenario for traders who have funds in QuadrigaCX as the founder is dead:
snip-
I think can we say also to their clients on QuadrigaCX exchange that condolence to their fund.

As I have noticed on the link that the issues are many people asking proof of death by Mr. Cotten that to prove of his passing.
Sounds like shady because not showing proof of that but besides they respect Mr. Cotten's wife and family because they are now in pain.

Well, we don't know the whole story but that's impossible even his own family member doesn't know or having access even access on the gadget that he used(laptop/pc) maybe there's a seed phrase their to recover the cold storage of the said exchange and back all client's funds.

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February 02, 2019, 05:02:21 PM
 #9

Maybe its $190 mln - and I think this will help some impatience and only profit seeking crypto users to think again to take control of their keys.
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February 02, 2019, 05:08:21 PM
 #10

Maybe its $190 mln - and I think this will help some impatience and only profit seeking crypto users to think again to take control of their keys.
There was someone saying some of their customers held $10 million worth of fiat/crypto in their accounts on this exchange.
Anybody holding this amount is asking for something to happen to it. Cause with all the exchanges being so careless lately  (cryptopia comes to mind with the recent loss of alot of ethereum) why would anyone have their funds so vulnerable like this? It just doesnt make any common sense to do this.

Can anyone say mt.gox 2.0? Roll Eyes

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February 02, 2019, 05:13:58 PM
 #11

this raises the legal question of  how can the bitcoin private keys be inherited in case of death
surely only one person holding the private keys for 145$ mil worth of coins is a security breach of big proportions
probably after some time they could be found on some of his devices or this is going to be a very very bad news for the exchange's customers
one more reason to never store your coins on an exchange

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February 02, 2019, 05:16:27 PM
 #12

i think that is what we can call a good example of "centralized point of failure" .


It's more like " a single point of failure". Trusting just one person with keys of an organization is extremely foolish, there are many cryptographic schemes, like for example multisig or Shamir's Secret Sharing, that allow to spread the trust across multiple entities and they can be set up in a way that doesn't require all of them to present their keys.


Hmmmm.....

Quote
Mr. Cotten was diligent in other areas of his life. He signed a will on Nov. 27, less than two weeks before he died. 

sauce:
https://www.reddit.com/r/QuadrigaCX/comments/amaqyo/we_need_to_sue_geralds_estate_directly/



Sounds very sketchy, probably an exit scam. We haven't seen them in a while, if there were indeed $145 mln, this gotta be the biggest in the recent years.

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February 02, 2019, 06:32:55 PM
 #13

I agree that this is shady and very intriguing as hell, specially the complications. We can't discount the fact that they might be pulling a exit scam as well as there are lots of questions need to be answered. I wouldn't say Mt. Gox 2.0 though. Mt. Gox case is very different because it cornered majority of the traders that time but the amount involved here is huge as well.

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February 03, 2019, 08:55:48 AM
 #14

The exchange owner should have planned ahead for situations like this.  He probably did but no one has figured out how.
 This is another reason why keeping coins on centralized exchange is dangerous and not recommended.



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February 03, 2019, 07:35:16 PM
 #15

Worst possible scenario for traders who have funds in QuadrigaCX as the founder is dead:

Quote
The exchange kept most its assets in offline storage systems called cold wallets, which are secured by digital security keys in order to protect them from hacking and theft. Cotten was solely responsible for the wallets and corresponding keys, which the company has been trying to find after his passing.

https://cointelegraph.com/news/crypto-exchange-quadrigacx-missing-145-mln-after-death-of-founder

Its seems that the owner has access to funds alone. And with his death, there's no one besides him that can unlock it. I guess this is another lessons learn for crypto owners to implement multi-signature (correct me I'm if wrong), and for traders to just keep small amounts in a exchange for trading purposes only so that in a event of a hack and this time a death of the crypto exchange founder itself would not put your funds at risk.

You're absolutely right.

I have no idea why this exchange was set up in the way that was essentially bound for this to happen, since it is terrible practice to have a non-multisig cold storage wallet that holds all the funds, which only one person has exclusive access to. That kind of set up is just waiting for disasters, and I wonder how many more exchanges are doing this.

But as you say, exchanges shouldn't be trusted as a wallet, nor should you store funds on there for longer than necessary. The facts are simple here, you don't know how their internal security is run, and you don't know when there is a risk that your funds will be frozen/suspended. Bitcoin is made to be trustless for a reason.

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February 04, 2019, 05:51:14 AM
Merited by JayJuanGee (1), Pamoldar (1)
 #16

The ceo of Kraken exchange is stating the addresses on his exchange belong to the QuadrigaCX exchange.
https://twitter.com/jespow/status/1091863628066770944

And on the some other sites they are showing the coins from this exchange in question are moving.

He did a fake his death because you can not die from crohns disease. Roll Eyes
And he did a will november 27, 2018 then married and off to india to start an orphanage?
Doesnt this seem particular to anyone else who is buying a fictitious story?
They described most of this on the globe & mail shown in their article.
https://www.theglobeandmail.com/business/streetwise/article-quadriga-cant-access-190-million-following-ceos-death-court/

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February 04, 2019, 08:54:16 PM
 #17

you can not die from crohns disease. Roll Eyes
You absolutely can.

I agree the entire thing is suspicious as hell. He signed a will 2 weeks before he died. He signed everything over to his new wife. He even made arrangements for $100,000 to be assigned to care for his two pet dogs. And we are to believe that no one at Quadriga thought it was a bad idea to have the entire cold storage depending on one man's memory? I mean, most people on here will tell you that's a stupid idea. I find it hard to believe no one at a multi-million dollar company thought this was a bad idea. But, it is completely possible to die from Crohn's disease.

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February 04, 2019, 11:22:29 PM
 #18

And we are to believe that no one at Quadriga thought it was a bad idea to have the entire cold storage depending on one man's memory? I mean, most people on here will tell you that's a stupid idea. I find it hard to believe no one at a multi-million dollar company thought this was a bad idea.
That's what you get when amateurs who never dealt with large amounts of funds suddenly run a multi million dollar business. It's too tempting for certain people to take a run with people's funds.

This is exactly why I believe that large scale traders and institutions don't want to deal with crypto currency exchanges, but rather wait for other institutions to set up trading desks, and I can't even blame them.

Every year we're seeing how multiple exchanges go down and the operators take a run with people's funds, or that the operators claim to have suffered from a hack, while it was an insider job....

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February 04, 2019, 11:49:18 PM
Merited by vapourminer (1)
 #19

This is exactly why I believe that large scale traders and institutions don't want to deal with crypto currency exchanges, but rather wait for other institutions to set up trading desks, and I can't even blame them.

Every year we're seeing how multiple exchanges go down and the operators take a run with people's funds, or that the operators claim to have suffered from a hack, while it was an insider job....

When it's entities like the ICE and Fidelity and Citibank holding custody instead of lone exchange operators or Bitgo multisig, there will probably be fewer exit scams like this. However, there will still continue to be hacks and embezzlement attempts by insiders. One of these Wall Street custody solutions will eventually get compromised and that'll trigger a major controversy about the viability of Bitcoin securities and physically settled derivatives. I just wonder how big the market will be and how much will be in custody when that happens.

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February 05, 2019, 03:32:53 PM
 #20

Every year we're seeing how multiple exchanges go down and the operators take a run with people's funds, or that the operators claim to have suffered from a hack, while it was an insider job....
Yeah. The difference here is that this was a large (Canada's biggest) and supposedly reputable exchange, not some 2-bit unheard of altcoin/token exchange that usually exit scams.

With more details emerging, it seems more likely that this isn't incompetence regarding cold storage but rather an exit scam: https://www.ccn.com/wheres-the-missing-150-million-crypto-exchange-quadrigacxs-fiasco-gets-weirder-with-new-research

Apparently there are no cold wallets, withdrawals were being paid from deposits, and the "inaccessible" wallets have continued to move funds after the alleged "death" of the owner. It seems like this owner has been regularly siphoning off funds for himself over the past several months and years, and was essentially running a Ponzi. Also worth pointing out that since Quadriga required KYC, he could quite easily have used any of the submitted KYC details to open accounts at other exchanges to cash out.

A great example of "not your keys, not your bitcoin" and avoiding KYC requirements all rolled in to one.

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